Question : 11.Connor has $300,000 to invest in a 5 year annuity. : 1257021

 

 

11.Connor has $300,000 to invest in a 5 year annuity. Assuming the time value of money is 10%, what amount will Connor receive in cash each year? (Do not round your PV factors. Round your answer to the nearest dollar.)   

A. $79,139

 

B. $60,000

 

C. $96,631

 

D. None of these answers is correct.

 

 

12.A cash flow that only occurs in equal amounts each year is referred to as:   

A. a lump sum.

 

B. a perpetuity.

 

C. an annuity.

 

D. None of these.

 

 

13.Which of the following cash flow patterns represents of an annuity?     

A. A

 

B. B

 

C. C

 

D. Any of the answers can represent an annuity.

 

 

14.Which one of the following statements describes an ordinary annuity?   

A. Series of cash inflows of varying amounts collected at the end of each period

 

B. Series of cash flows of equal amounts collected at the end of each period

 

C. Series of cash flows of varying amounts collected at the beginning of each period

 

D. Series of cash flows of equal amounts collected at the beginning of each period

 

 

15.Which of the following is not a major cash inflow from a capital investment?   

A. Incremental revenue

 

B. Increase in working capital

 

C. Cost savings

 

D. Salvage value

 

 

16.When calculating the present value of an ordinary annuity, it is assumed that:   

A. cash flows will be reinvested at the required rate of return.

 

B. cash flows are withdrawn at the end of each year.

 

C. the investor will wait until the end of the investment period to withdraw cash flows.

 

D. Both cash flows will be reinvested at the required rate of return and cash flows are withdrawn at the end of each year are correct.

 

 

17.A customary assumption in capital budgeting analysis is that:   

A. the desired rate of return includes the effects of compounding.

 

B. the cash inflows generated by the investment are not reinvestment.

 

C. annual cash flows occur at the beginning of each period.

 

D. the time value of money is ignored.

 

 

18.Jiminez Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows:  The total present value of Investment A’s cash flows assuming an 8% minimum rate of return is (Do not round your PV factors and intermediate calculations. Round your answer to the nearest whole dollar):   

A. $14,936.

 

B. $4,936.

 

C. $7,000.

 

D. $12,000.

 

 

19.Harvey wants to determine the net present value for a proposed capital investment. He has determined the desired rate of return, the expected investment time period, a series of cash inflows of equal amount, the salvage value of the investment, and the required cash outflows. Which of the following tables would most likely be used to calculate the net present value of the investment?   

A. Present value of annuity.

 

B. Future value of a lump sum.

 

C. Present value of annuity and present value of a lump sum.

 

D. Future value of annuity and future value of a lump sum.

 

 

20.Morrisey Company has two investment opportunities. Both investments cost $5,500 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below:  The net present value of Investment II assuming an 8% minimum rate of return would be which of the following amounts? (Do not round your PV factors and intermediate calculations. Round your answer to nearest whole dollar.)   

A. $6,492

 

B. $992

 

C. $5,880

 

D. $380